1) Incremental analysis is synonymous with
a.difficult analysis
b.differential analysis
c.gross profit analysis
d.derivative analysis
2) The functions of management in an organization are:
a.planning, directing, and controlling
b.planning, controlling, and decision making
c.directing, controlling, and decision making
d.directing, planning, and decision making
3) Inventories affect
a.only the balance sheet
b.only the income statement
c.both the balance sheet and the income statement
d.neither the balance sheet nor the income statement
4) If a check correctly written and paid by the bank for $584 is incorrectly recorded on
the companys books for $548, the appropriate treatment on the bank reconciliation
would be to
a.deduct $36 from the books balance
b.add $36 to the books balance
c.deduct $36 from the banks balance
d.deduct $584 from the books balance
5) The standard format of a journal would not include
a.a reference column
b.an account title column
c.a T-account
d.a date column
6) If a company has limited resources, the key factor in performing incremental analysis
is
a.contribution margin
b.limited resources required
c.contribution margin per unit of limited resource
d.none of these
7) Kate Taylor Co. reported the following information for 2014:
OctoberNovemberDecember
Budgeted sales$460,000$540,000$440,000
Budgeted purchases$240,000$256,000$288,000
All sales are on credit.
Customer amounts on account are collected 50% in the month of sale and 50% in the
following month.
Cost of goods sold is 35% of sales.
Kate Taylor purchases and pays for merchandise 70% in the month of acquisition and
30% in the following month.
Accounts payable is used only for inventory acquisitions.
How much cash will Kate Taylor receive during November?
a.$270,000
b.$490,000
c.$500,000
d.$540,000
8) In preparing a statement of cash flows, a conversion of bonds into common stock
will be reported in
a.the financing section
b.the “extraordinary” section
c.a separate schedule or note to the financial statements
d.the stockholders’ equity section
9) The per-unit standards for direct materials are 2 gallons at $3 per gallon. Last month,
5,600 gallons of direct materials that actually cost $16,200 were used to produce 3,000
units of product. The direct materials quantity variance for last month was
a.$1,200 unfavorable
b.$1,200 favorable
c.$9,000 unfavorable
d.$2,800 unfavorable
10) The following inventory information is available for Gage Manufacturing
Corporation for the year ended December 31, 2014:
BeginningEnding
Inventories:
Raw materials$17,000$18,000
Work in process9,00017,000
Finished goods 11,000 5,000
Total$37,000$40,000
In addition, the following transactions occurred in 2014:
1>Raw materials purchased on account, $73,000.
2>Incurred factory labor, $85,000, all is direct labor. (Credit Factory Wages Payable).
3>Incurred the following overhead costs during the year: Utilities $5,800, Depreciation
on manufacturing machinery $9,000, Manufacturing machinery repairs $8,200, Factory
insurance $8,000 (Credit Accounts Payable and Accumulated Depreciation).
4>Assigned $85,000 of factory labor to jobs.
5>Applied $35,000 of overhead to jobs.
Instructions
(a)Journalize the above transactions.
(b)Reproduce the manufacturing cost and inventory accounts. Use T-accounts.
(c)From an analysis of the accounts, compute the following:
1>Raw materials used.
2>Completed jobs transferred to finished goods.
3>Cost of goods sold.
4>Under- or overapplied overhead.
11) Surrie Company produces flash drives for computers, which it sells for $20 each.
The variable cost to make each flash drive is $13. During April, 700
drives were sold. Fixed costs for April were $2 per unit for a total of
$1,400 for the month. How much is the monthly break-even level of
sales in dollars for Surrie Company?
a.$200
b.$4,000
c.$14,000
d.$8,400
12) Sturm Corporation earns 8% on an investment that will return $600,000, 5 years
from now. Below is some of the time value of money information that Sturm has
compiled that might help in planning compound interest decisions.
Present Value of 1 for 5 periods at 8%0..68058
Future Value of 1 for 5 periods at 8%1.46933
Present Value of an Annuity of 1 for 5 periods at 8%3.99271
Future Value of an Annuity of 1 for 5 periods at 8%5.86700
To the closest dollar, what is the amount Sturm should invest now to earn this rate of
return?
a.$881,598
b.$408,348
c.$2,395,626
d.$616,107
13) Jim-Mate Company supplies schools with floor mattresses to use in physical
education classes. Jim-Mate has received a special order from a large school district to
buy 700 mats at $55 each. Acceptance of the special order will not affect fixed costs but
will result in $1,500 of shipping costs.
For the first 7 months of 2014, the company reported the following operating results
while operating at 75% capacity:
Sales (100,000 units)$9,000,000
Cost of goods sold 5,300,000
Gross profit3,700,000
Operating expenses 2,500,000
Net income$ 1,200,000
Cost of goods sold was 70% variable and 30% fixed; operating expenses were 75%
variable and 25% fixed.
Instructions
(a)Prepare an incremental analysis for the special order.
(b)Should Jim-Mate Company accept the special order? Justify your answer.
14) Shine Company uses flexible budgets. At normal capacity of 16,000 units, budgeted
manufacturing overhead is: $48,000 variable and $276,000 fixed. If Shine had actual
overhead costs of $321,000 for 18,000 units produced, what is the difference between
actual and budgeted costs?
a.$3,000 unfavorable
b.$3,000 favorable
c.$9,000 unfavorable
d.$9,000 favorable
15) In common size analysis,
a.a base amount is required
b.a base amount is optional
c.the same base is used across all financial statements analyzed
d.the results of the horizontal analysis are necessary inputs for performing the analysis
16) The partners’ income and loss sharing ratio is 2:3:5, respectively.
CHENARD, JENNINGS, AND BLAIR PARTNERSHIP
Balance Sheet
December 31, 2014
AssetsLiabilities and Owners’ Equity
Cash$ 45,000Liabilities$150,000
Noncash assets285,000CHENARD, Capital60,000
JENNINGS, Capital90,000
BLAIR, Capital 30,000
Total$330,000Total$330,000
If the CHENARD, JENNINGS, and BLAIR Partnership is liquidated by selling the
noncash assets for $375,000, and creditors are paid in full, what is the total amount of
cash that CHENARD will receive in the distribution of cash to partners?
a.$18,000
b.$117,000
c.$78,000
d.$75,000
17) Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2014 .
Interest expense for the year ended December 31, 2014 was
a.$6,000
b.$2,500
c.$2,000
d.$1,500
18) After the adjusting entries are journalized and posted to the accounts in the general
ledger, the balance of each account should agree with the balance shown on the
a.adjusted trial balance
b.post-closing trial balance
c.the general journal
d.adjustments columns of the worksheet
19) The debt to assets ratio is computed by dividing
a.long-term liabilities by total assets
b.total debt by total assets
c.total assets by total debt
d.total assets by long-term liabilities
20) Which decision will involve no incremental revenues?
a.Make or buy decision
b.Drop a product line
c.Accept a special order
d.Additional processing decision
21) During August, 2014, Baxters Supply Store generated revenues of $60,000. The
companys expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxters gross profit for August, 2014 is
a.$20,000
b.$21,000
c.$23,000
d.$24,000
22) The formula for computing a predetermined overhead rate is:
a.estimated annual overhead costs actual annual operating activity
b.estimated annual overhead costs estimated annual operating activity
c.actual annual overhead costs estimated annual operating activity
d.actual annual overhead costs actual annual operating activity
23) Improvements are
a.revenue expenditures
b.debited to an appropriate asset account when they increase useful life
c.debited to accumulated depreciation when they do not increase useful life
d.debited to an appropriate asset account when they do not increase useful life
24) A contingent liability should be recorded in the accounts if it is:
a.remote
b.reasonably possible
c.probable and reasonably estimable
d.Both (a) and (b) above
25) If budgets are to be effective, there must be
a.a history of successful operations
b.independent verification of budget goals
c.an organizational structure with clearly defined lines of authority and responsibility
d.excess plant capacity
26) The direct materials price standard should include an amount for all of the
following except
a.receiving costs
b.storing costs
c.handling costs
d.normal spoilage costs
27) When using discounted cash flow techniques:
a.a project with an internal rate of return that is zero or positive is acceptable
b.a project with a net present value that is zero or positive is acceptable
c.potential salvage value should be ignored as a noncash flow item
d.the internal rate of return method, but not the net present value method, is usable with
unequal annual cash inflows
28) A total materials variance is analyzed in terms of
a.price and quantity variances
b.buy and sell variances
c.quantity and quality variances
d.tight and loose variances
29) At December 31, 2014, Florrict Company has $500,000 of $100 par value, 6%,
cumulative preferred stock outstanding and $2,000,000 of $10 par value common stock
issued. Florricts net income for the year is $410,000.
Instructions
Compute earnings per share of common stock for 2014 under the following
independent situations. (Round to two decimals.)
(a)The dividend to preferred stockholders was declared, and there has been no change
in the number of shares of common stock outstanding during the year.
(b)The dividend to preferred stockholders was not declared, and 10,000 shares of
common treasury stock were held throughout the year. The preferred stock is
cumulative.
30) Randall Company bought real estate, on which there was an old office building, for
$400,000. It paid $30,000 in cash as a down payment and signed an 8% mortgage for
the remainder. It immediately had the old building razed at a net cost of $25,000.
Attorneys were paid $8,000 in connection with the land purchase and an additional
$4,000 in connection with permits and zoning variances necessary for Randalls new
office building. $25,000 was paid for excavation for the basement of the new building,
$1,600,000 was paid for construction of the new building, and $55,000 was paid for a
parking lot and necessary walkways and driveways. For how much should the land be
recorded?
a.$433,000
b.$400,000
c.$425,000
d.$403,000
31) Mclantnic Bagpipes produces two models: Model 24 has sales of 500 units with a
contribution margin of $40 each; Model 26 has sales of 350 units with a contribution
margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit
change?
a.$5,000 increase
b.$17,500 increase
c.$22,500 increase
d.$35,000 increase
32) For a merchandiser, the starting point in the development of the master budget is the
a.cash budget
b.sales budget
c.selling and administrative expenses budget
d.budgeted income statement
33) Credits
a.decrease both assets and liabilities
b.decrease assets and increase liabilities
c.increase both assets and liabilities
d.increase assets and decrease liabilities
34) Which of the following is not a proper match-up?
a.Long range planning Strategies
b.Budgeting Short-term goals
c.Long-range planning 5 years
d.Budgeting Long-term goals
35) When bonds are converted into common stock and the conversion is recorded, the
________________ of the bonds is transferred to paid-in capital accounts.
36) Santos Corporation gathered the following information for the fiscal year ended
December 31, 2014:
Sales$1,500,000
Operating expenses160,000
Cost of goods sold960,000
Loss on disposal of equipment40,000
Santos Corporation is subject to a 30% income tax rate.
Instructions
Prepare a partial income statement, beginning with income from operations.
37) In October, Fink Inc. reports 42,000 actual direct labor hours, and it incurs
$196,000 of manufacturing overhead costs. Standard hours allowed for the work done
is 40,000 hours. Finks predetermined overhead rate is $5.00 per direct labor hour.
Instructions
Compute the total manufacturing overhead variance.
38) The net income (or loss) for the period
is found by computing the difference between the trial balance totals and the adjusted
trial balance totals
is found by computing the difference between the income statement credit column and
the balance sheet credit column on the worksheet
c.cannot be found on the worksheet
d.is found by computing the difference between the income statement columns of the
worksheet
39) Under a double-entry system, show how the entry in each statement is entered in
the ledger by using debit or credit to indicate the increase or decrease in the affected
account.
Debit or Credit
1>An increase in Salaries and Wages Expense.
2>A decrease in Accounts Payable.
3>An increase in Prepaid Insurance.
4>An increase in Owner’s Capital.
5>A decrease in Supplies.
6>An increase in Owner’s Drawings.
7>An increase in Service Revenue.
8>A decrease in Accounts Receivable.
9>An increase in Rent Expense.
10>A decrease in Equipment.
40) Brown Bear Merchandising Inc. has three product lines in its retail stores: books,
videos, and music. Results of the fourth quarter are presented below:
Books Music Videos Total
Revenue$25,000$40,000$28,000$93,000
Variable departmental costs17,00021,00012,00050,000
Direct fixed costs4,0006,0003,00013,000
Allocated fixed costs 5,000 5,000 5,000 15,000
Net income (loss)$ (1,000)$ 8,000$ 8,000$ 15,000
The allocated fixed costs are unavoidable. Demand for individual products is not
affected by changes in other product lines.
Instructions
What will happen to profits if Brown Bear discontinues the Books product line?